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You can install Linux in other partition, read carefully all instruction step by step. Normally Windows does not recognize Linux file system like ext2, ext3, ext4...but you can see all Windows partition in Linux when you mount it.

First of all why you want to use Windows and Linux in single system? If it is
only for use for testing purposes than I suggest you use some kind of virtual
machine. Like VMWare workstation or Oracle Virtual Box. This is give you
the exact environment but it require more physical memory because it handle
two os simultaneously. You don't required to boot for switching from Linux
to Windows or Windows to Linux.

Even I use this with Windows 2000 in production environment also, an it
works fine for me.

I can boot from Puppy Linux Live CDs and see my files in either the Windows or Linux computers, which is how I can rescue them off flaky hard drives, moving them to USB. You could make a Fat32 partition, then both Linux and Windows could read it, or is that unsafe in the newer OSs these days?

Any of the approaches suggested are possible alternatives; it all depends on what your objectives are. Using a virtual machine approach such as VMware or Virtualbox is an easy way to be able to use either Windows or Linux from the same bootable image, and you can run install VMware or Virtualbox on either platform.

In the distant past, accessing Linux file systems from Windows was not possible, but I am pretty certain that there are options there that at one time did not exist. Accessing Windows file systems from Linux systems has been possible for many years now.

As mentioned, Puppy Live CDs are capable of accessing either Linux or Windows file systems. Quite a few systems besides Puppy can also do the same, whether live or installed.

Quite a few years ago now, dating way back to the middle 2000s, Ubuntu created an environment called Wubi, which allowed you to install Ubuntu right within Windows, but that was hardly the first time you could do this. Years prior to that, Slackware could also be installed either using a Linux partition or a Windows FAT formatted partition.

So this question really boils down to what you would like to do with these environments. I'd say that the approach that you choose to take depends greatly upon what your goals for this exercise are.

You can install Linux in other partition, read carefully all instruction
step by step. Normally Windows does not recognize Linux file system like
ext2, ext3, ext4...but you can see all Windows partition in Linux when you
mount it and for reading Linux file under window use this link * http://www.diskinternals.com/linux-reader/

Yes, you see both option in grub boot loader, but option timing is very
less, if you not watch the screen than it start in default os which is set
on grub.conf. You increase the time to edit the boot loader from grub.conf.

vi /boot/grub/grub.com and increase the timeout value as per your
requirement. If you want to avoid the regular selection and start windows
default than you change the value of default=0 option to 1 or 2 as per your
system in grub.conf.

I am not sure which distribution of Linux I should use but their are Redhat,Ubunto,Fedora and etc.

Which of these distributions take less system resources?

Also I wanted to know that when we install Linux ,as Windows has bootloader and linux has Grub, isn't their any conflict between them? I mean when we install Linux, does the Grub replaces the Windows Bootloader?

I have found Ubuntu probably to be the best and it loads fast, has a sleek beautiful design. Another thing is choosing an OS goes with Usage. What are you going to use it for ? Just for Desktop Applications ? For Server Services I would go for Rehat or Centos.

As per system resource concern, it depends what services or packages you
installed with OS, like: webserver, sql, sendmail.
All three distribution is ok and you can choose any one. As per my concern
I would suggest you for testing purpose you use Fedora or Ubuntu.

For boot loader, there is no conflict between windows or linux bootloader.
When you install linux the default bootloader is grub. Suppose if you
remove linux or don't want to use linux, than you boot windows from cd and
go to command mode. Once you get command prompt run fdisk /mbr, this
command rewrites master boot record.

That's correct if you give/gave Linux a physical partition. But you could install Linux on a virtual machine and run Linux from Windows (or whatever OS has the VM sw). Then to uninstall Linux you just remove the VM installation of Linux (which is just a VM 'file').
I would suggest, if possible, use a VM installation of Linux first and see if you like/want it - (You could live a live CD to check first without any installation, but the speed of LiveCDs suck) If you do like/want it, then you can shrink the main partition and create a separate partition for Linux (unless you have two separate drives which is even better). You wll find that you need to create two partitions for Linux - one for Linux and one for the swap - but the Linux installer will take you through all that and even automate a lot of the process for you - how and by how much depends on the Linux version/distro you're using.

Linux installation is very easy nowadays and pretty safe to do and removal is easy.
In fact, if this is your first installation of Linux you will be impressed as not only will the Linux OS install, but also a boatload of sw (Open office, the C compiler, Games, etc.) plus all (or almost all) of the drivers - so you have a almost everything you need in the one install - without needing a stack of additonal CDs as with Windows. In some instances, you may have to go online to find some HW drivers for some of the hw - but this is now the exception rather than the norm (as it used to be). And gone are the bad old days of having to manually setup the x display for graphics etc. If this is your first Linux installation - you might be surprised to find that there are alternative desktops that you can choose from - Gnome, KDE, Enlightenment, etc. There isn't a Windows equivalent, but it's kinda like choosing your preferred UI - Win 3.11, Win 95/98, Win XP, Win 7, Win 8/Metro for the same WIndows OS sort of.
Allan

I am not sure which distribution of Linux I should use but their are Redhat,Ubunto,Fedora and etc.

I like debian based systems. These days Linux Mint is my choice for a desktop OS.

Which of these distributions take less system resources?

There are nice small linux distros like Puppy and DSL that use very few resources. However, the desktop or GUI is where you can really make a difference in resource usage. xfce is a very capable desktop designed for minimal resources while remaining easy to use. There is a version of Mint with xfce already installed. http://www.linuxmint.com/download.php If you don't like xfce, give LXDE a try. Linux lets you use many different desktop GUIs.

Also I wanted to know that when we install Linux ,as Windows has bootloader and linux has Grub, isn't their any conflict between them? I mean when we install Linux, does the Grub replaces the Windows Bootloader?

Installing Linux on an XP system is easier than ever before. GRUB the linux boot loader will allow you to select XP or Linux. If you select XP, the XP bootloader takes over and loads Windows normally.
When you install Linux, be sure to look for and use the option to keep XP intact. This is very easy in Mint. http://www.muktware.com/1246/dual-boot-install-linux-mint-11

For completely less System resources PCLinux is ok for Desktop but is based on Mandriva Flavour not Debian. I still prefer Ubuntu over Mint in that Mint is too flashy and always comes less in versioning with Ubuntu. For example the latest Ubuntu has Unity Gnome Desktop and uses Office Libre while as the latest Mint still looks like the Old Ubuntu. Unity Desktop uses less resources still making Latest Ubuntu far better on system resources and its beautiful for a Desktop OS. Also underdtand that Linux is highly customisable so much so that you can change Desktop to any flavours of your choice Ubuntu can run on KDE, GNOME, XFCE and many more. Many users who have used XFCE claims that its fast and uses less system resources too. You could look into changing your Desktop UI for optimisation.